JUDGMENT OM PRAKASH, J. :
At the instance of the Revenue, the Tribunal has referred the following question relating to asst. yr. 1975-76 for the opinion of this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that two separate assessments should be made for two periods i.e. 1st April, 1974 to 8th September, 1974 and 11th September, 1974 to 31st March, 1975 ?"
2. The facts as found by the Tribunal are that one of the partners of the assessee firm, namely, Smt. Illachi Devi died on 8th September, 1974, and thereafter the remaining partners, namely, Shri Krishna Gopal and Shri Ram Gopal continued to carry on the partnership business. The assessee-firm, therefore, filed two returns one for the period from 1st April, 1974 to 8th September, 1974, and the other for the period from 11th September, 1974 to 31st March, 1975. The contention of the assessee was that the firm stood dissolved on the death of one of the partners. The ITO, however, took the view that there was merely a change in the constitution within the meaning of s. 187 and that the case of the assessee did not fall under s. 188 of the IT Act, 1961 (briefly, the Act).
On appeal, the AAC accepted the contention of the assessee and accordingly directed the ITO to make two separate assessments for the two broken periods.
On further appeal, the Tribunal upheld the order of the AAC.
3. The aforementioned question is squarely covered by a decision of the Supreme Court in the case of CIT vs. Empire Estate (1996) 218 ITR 355 (SC) in which the Supreme Court observed as under :
"Sec. 188 states that where a firm carrying on a business is succeeded by another firm and the case is not covered by s. 187, separate assessments have to be made on the predecessor firm and the successor firm .... "Change in the constitution of the firm" is defined for the purpose. The relevant part of the definition states that if one or more of the partners cease to be partners in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change, there is a change in the constitution of the firm. These provisions would apply to the firm which survives upon the death of a partner. They would apply to the case of a partnership where a partner dies and the partnership deed provides that death shall not result in the dissolution of the partnership. Such provision is lawful because s. 42 of the Partnership Act contemplates it. If there is no such provision and a partner dies, the partnership stands dissolved. The partnership does not then survive upon the death of the partner ...... When the surviving partners in such a case continue the business in partnership, s. 188 is attracted for there is a succession of one by another partnership."
4. We have carefully gone through the assessment order and the orders passed by the appellate authorities. Neither the assessing authority nor the appellate authorities mentioned anywhere whether there was a contract to the contrary in the partnership deed whereunder Smt. Illachi Devi (deceased) was one of the partners. The legal position is that if there was a contract to the contrary in the said partnership deed, then the partnership shall survive even upon the death of one of the partners, otherwise not. It has, therefore, to be found out whether there was a contract to the contrary in the partnership deed. In the absence of such finding, it is difficult to give a categorical opinion whether the partnership survived upon the death of Smt. Illachi Devi, one of the partners.
Stating the legal position as aforesaid and without recording a clear finding on the aforementioned question, we remit the matter back to the Tribunal, who may record a clear finding on the question whether there was a contract to the contrary within the meaning of s. 42 of the Partnership Act in the original partnership deed. If the Tribunal comes to the conclusion that the original partnership deed mentioned a contract to the contrary, then the partnership will survive even upon the death of one of the partners and in that situation a single assessment shall be made on the assessee-firm.
If the Tribunal comes to the conclusion that there was no contract to the contrary in the original partnership deed, then the partnership would stand dissolved upon the death of Smt. Illachi Devi (one of the partners) and in that case, two separate assessments shall be made for the two broken periods.
The reference is decided accordingly.